340Buzz: All ghosts and goblins line up for a 340B tug of war

It’s been an eventful month on the 340B front, with the tug of war between manufacturers and covered entities over the role of contract pharmacies in the program — and the shape of the discount drug program itself — remaining unsettled, perhaps even spooky. 

With multiple court cases pending and the 2022 midterm elections looming, there are plenty of reminders that now may be the only time we have to fix some of the outstanding issues and strengthen the 340B statute for all participants. 

There are some positive, less frightening signs. Where it concerns drug pricing, which Democrats have tied to Biden’s massive “Build Back Better” infrastructure spending package, all signs point toward the House trying to navigate a much narrower path, with some headlines even suggesting the long-running proposal to allow Medicare to negotiate on drug prices is once again going down in flames. As a result, we do not currently see any substantive, negative changes in the offing for 340B. 

Staying on drug pricing, Health and Human Services Secretary Xavier Becerra recently issued a report to the White House, in response to President Biden’s executive order on increasing competition in the economy, in which he outlined drug-pricing reform principles that Congress could consider. In it, Becerra underlined the department’s “strong support” for 340B, which he noted involved roughly 13,000 covered entities that purchased $38 billion in covered outpatient drugs in 2020. It’s always good to know the White House is on our side.

Meanwhile, the big news continues to center on the fight drug companies have picked over contract pharmacies, which is where we begin. 

The seventh letter goes out

Boeringer Ingelheim is the latest of the “Egregious Eight” to have its wrists slapped by HRSA after the agency notified the drug maker that its policy restricting 340B pricing at contract pharmacies violates the statute and has resulted in overcharges for covered outpatient drugs. HRSA’s Oct. 4 letter follows the pattern of its earlier round of letters to six other manufacturers, and it ordered BI to take corrective actions by Oct. 18 — a deadline that has clearly passed with no changes. 

That leaves Merck as the lone manufacturer that HRSA has yet to serve notice regarding its contract pharmacy exclusions. If we can detect a pattern here, we’d expect HRSA to send the final letter to Merck, whose exclusions began Sept. 1, somewhere around Nov. 4. 

In the meantime, we encourage all covered entities to continue to monitor their monthly impact reports and use the reporting mechanism to HRSA to alert them to the lack of available 340B pricing at contract pharmacies. Sentry customers can also direct questions about their impact reports to their account management team. 

Court cases lurch forward 

At least some of the numerous federal lawsuits filed by manufacturers against the government over contract pharmacies appear to be moving closer to rulings from judges. 

In a hearing in Washington D.C. this month on the consolidated claims by Novartis and United Therapeutics, U.S. District Judge Dabney Friedrich noted, correctly, that the 340B statute makes no mention whatsoever of contract pharmacies. But, she reportedly questioned lawyers representing the two manufacturers about other angles the government might successfully pursue to win its cases. Dabney also reportedly promised to issue her opinion in the matter soon.

Meanwhile, 340B Report received confirmation from HRSA that it has assigned alternative dispute resolution (ADR) panels for an unknown number of proceedings on ADR petitions brought by covered entities against drug manufacturers for blocking 340B pricing at contract pharmacies. 

There are five known ADR petitions. Two are from the National Association of Community Health Centers (NACHC) — one against AstraZeneca and Sanofi, the other against Eli Lilly — with three from federally qualified health centers, all against AstraZeneca. The Pharmaceutical Research and Manufacturers of America (PhRMA) has sued to have the ADR process declared unconstitutional. 

The day after 340B Report ran its story, Sanofi asked a federal judge for a stay in the 340B ADR proceedings brought against it by NACHC, while simultaneously confirming in its filing that it was the subject of one of the newly created ADR panels. While Sanofi was no doubt emboldened by Eli Lilly, which successfully pursued a similar stay in its ADR petition case, a judge denied Sanofi’s emergency motion, adding she expects to issue a decision in Sanofi’s contract pharmacy lawsuit by Nov. 5.

Eyes on Arkansas

Arkansas’ state insurance commissioner has ordered an end to a 90-day suspension of its law protecting 340B contract pharmacy pricing, effective Oct. 29. PhRMA, which has sued over the law in federal court, asked to block enforcement of the new law while the six federal lawsuits by drug makers over contract pharmacies proceed.

Watch this space. Arkansas will likely set a precedent for what happens in other states that have enacted their own 340B contract pharmacy laws. If PhRMA prevails, it will no doubt pounce on these other state laws. It could also inspire pharmacy benefit managers, still reeling from last December’s Supreme Court ruling in Rutledge v. Pharmaceutical Care Management Association, which found that a federal law does not preempt an Arkansas state law regulating PBM reimbursements to pharmacies.  

340B rebates?

October saw yet another new lawsuit in the contract pharmacy fray. Kalderos, a company pushing a manufacturer-friendly 340B software solution, has sued HHS and HRSA from a new position. Kalderos’s 340B Pay solution would require covered entities to upload claims data to its platform for manufacturers to analyze and ensure against duplicate discounts before granting 340B pricing, effectively converting 340B from a discount drug program to an after-the-transaction rebate. Only there’s a problem.

“Kalderos repeatedly stressed to Defendants that it was being prevented from launching and effectively marketing its solution because manufacturers had not been advised by Defendants that Kalderos’ conditions of use were permissible,” the company said in its filing. Kalderos claims it was informed that HRSA’s Office of Pharmacy Affairs had told HHS that its model was consistent with the 340B statute and should be cleared for use. Further, HRSA’s warnings to manufacturers about their contract pharmacy restrictions have harmed the company’s commercial prospects, the lawsuit alleges. 

From the onset, Kalderos appeared to predicate its rebate business model on the fact that HRSA has, since 1998, permitted rebates for state AIDS Drug Assistance Programs as an optional way to receive 340B pricing. But that final rule went through an official notice and comment period before HRSA made it final. Kalderos has tried to position itself as a neutral arbiter interested only in 340B integrity, but the company showed its true colors in its lawsuit, where it argued that the manufacturers are justified in enacting contract pharmacy exclusions and that HRSA erred in sending them non-compliance letters. 

It adds more fuel to the fires being set to move 340B away from its original intent. 

Congressional and federal action

There’s been some activity on the federal level concerning 340B:

• The Biden administration has officially rescinded the injectable epinephrine/insulin rule that would have required covered entities to pass along all 340B savings directly to patients. The rule would have affected community health clinics that participate in 340B. 

• HHS is close to scrapping Trump-era regulations that limit HRSA’s ability to enforce 340B rules. The White House Office of Management and Budget has given HHS the OK to revoke regulations left over from the last days of the Trump administration that treat HRSA guidance as non-binding both legally and in practice, meaning it carries no legal authority. And of course, HRSA has very limited power to issue regulations. HHS published notice proposing to repeal the regulation on Oct. 21. Following the notice to repeal is a 30-day public notice and comment period.

• The U.S. Senate Appropriations Committee has thrown its support behind 340B and HRSA in the standoff over contract pharmacies. In a statement, the committee said it was “concerned” about both the contract pharmacy restrictions and that manufacturers “may adopt a rebate model that could limit covered entity access to 340B pricing.” The committee added that it “supports HRSA’s continued use of its authorities and any available measures, including the imposition of civil penalties, where appropriate, to hold those drug manufacturers in violation of the law directly accountable.”

• Efforts to oppose the nearly 30% cut in Medicare Part B drug reimbursements to 340B hospitals received a boost recently from the Congressional Black Caucus. Reps. Robin Kelly (D-Ill.) and Lisa Blunt Rochester (D-Del.) sent a letter signed by 27 other caucus members to Chiquita Brooks-LaSure, the CMS administrator, outlining the importance of 340B to minority patients and the harm the cuts have done to 340B hospitals. It asks CMS to return to its policy of reimbursing 340B hospitals at the same rate as non-340B hospitals. “Since the cuts began, 340B hospitals, subject to the cuts, have collectively lost hundreds of millions of dollars, harming their ability to fund critical services for patients,” the members wrote. First instituted by the Trump administration, the Biden administration has proposed continuing the cuts and is expected to issue its final hospital Outpatient Prospective Payment System (OPPS) rule early next month. The U.S. Supreme Court is due to hear arguments over the legality of the cuts on Nov. 30.

• The Medicare Payment Advisory Committee (MedPAC), the Medicare advisory group to Congress that we can thank for first pushing for Medicare Part B reimbursement cuts to covered entities, is once again looking at Medicare drug costs. The good news is that in November, the organization is inviting safety net providers to provide their perspectives. There’s a good chance 340B will come up in those conversations, this time in a good light. MedPAC meets Nov. 8 and 9, location TBD.  

• Meanwhile, efforts by lawmakers to undermine 340B continue. Freshman Rep. Matt Rosendale (R-Mont.) has joined the fray, introducing a bill calling for a raft of restrictions on the program. They include a two-year moratorium on non-rural disproportionate share hospital and child site registrations, during which HHS would have to devise new regulations governing their 340B participation, and instituting new rules governing 340B DSH, children’s and cancer hospital sites, among other proposals. Rosendale’s bill, HR 5463, isn’t likely to advance in the Democrat-controlled House, but it’s the latest reminder that the tide could shift against covered entities if Republicans win control of either the House or Senate (or both) in 2022.

340B tidbits

• Organizers of the 340B Coalition Winter announced that the event will be live in-person when it takes place in San Diego Jan. 31-Feb. 2, 2022. It will mark two years since its last in-person conference. Attendees and exhibitors will be required to either show proof of being vaccinated “or present a negative COVID-19 test result within 72 hours of the first day of attending”. Masks may be required, depending on local health ordinances and conditions.

• Yours truly testified Oct. 20 before a Special Committee of the Kansas Legislature on the 340B program, where I provided an overview of 340B, the process and its various stakeholders to lawmakers. More information is here.

Things could definitely be perceived as scary in 340B as we get deeper into fall and Halloween approaches. What other ghosts, goblins or witches are out there? 340Boo! We will continue to watch for those dressed in costume as they unveil themselves in November. 

Meanwhile, please contact your congressional representatives and urge them to support 340B so we can continue to provide access to the most vulnerable members of our communities.